2023 (11) TMI 437 - AT - Income Tax

Revision proceedings under Section 263 against dissolved company held void ab initio, reassessment notice lacking mandatory approval invalid

Madhuban Dealers Pvt. Ltd. (presently known as Madhuban Dealers LLP) Versus Pr. Commissioner of Income-tax, Kolkata

ITAT Kolkata held that revision proceedings u/s 263 against a non-existent entity are void ab initio. The assessee company was dissolved due to ... Revision u/s 263 against non-existence entity - two consecutive revision proceedings - Company dissolved due to amalgamation - HELD THAT:- Undisputedly the assessee has been converted into M/s. Madhuban Dealers LLP with effect from 13th April, 2015 meaning thereby that the assessee-company stood wound up and is no more in existence. Therefore, the original revisionary order passed under section 263 of the Act was itself void ab initio and invalid and consequently notice issued under section 263 of the Act dated 15.02.2022 in the set aside proceedings as well as the impugned order dated 23.03.2022 were also rendered invalid and void regardless of the fact that revisionary order dated 13.03.2020 was restored to the Pr. CIT by the tribunal. The case of the assessee finds support from the decision of M/s. Durga Vinimay Pvt. Limited & Others [2019 (11) TMI 1140 - ITAT KOLKATA] in which as held on the similar facts and circumstances that the revisionary order passed under section 263 on the non-existent company, to be bad-in-law since the said entity was amalgamated/dissolved. When the original revisionary order was itself illegal and without jurisdiction, the same cannot be give rise any valid collateral proceedings in the second round as well. Therefore, the impugned order passed under section 263 dated 23.03.2022 pursuant to such illegal and invalid original revisionary order dated 13.03.2020 deserves to be quashed. Reopening of assessment proceedings - The re-assessment notice was issued under section 148 of the Act by the ld. Assessing Officer without obtaining prior approval from ld. JCIT/Addl. CIT, Range- 4, Kolkata in terms of section 151 of the Act and, therefore, the order passed u/s 147 is rendered null and void. The facts of the case are that notice under section 148 was issued by the ld. ITO, Ward-4(1), Kolkata after the expiry of four years and within six years from the end of the relevant assessment year. In terms of section 151 of the Act as it stood then, at the relevant point of time, the ld. ITO was required to obtain prior approval of ld. Addl./Jt. CIT, Range-4, Kolkata before issuance of the notice under section 148 - we note that the sanction/approval proforma prepared by AO in terms of section 151 of the Act was not approved, as the ld. JCIT/Addl. CIT, Range-4, Kolkata has not signed the same and consequently the reopening is held to be invalid and null and void in absence of any approval of the competent authority. Thus where the re-assessment order passed under section 144/147 of the Act dated 27.12.2017 itself suffered from fundamental infirmity and jurisdictional defect, which is not curable and is invalid and void. Then all consequent actions including the revisionary order under section 263 of the Act is also invalid ,non-est and bad in the eyes of law. The case of the assessee is squarely covered by the decision of the Hon’ble Apex Court in the case of Kiran Singh –vs.- Chaman Paswan [1954 (4) TMI 48 - SUPREME COURT] as held where a defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject matter of the action, strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties. Appeal of assessee allowed. Issues Involved:1. Invalid exercise of jurisdiction under Section 263 of the Income-tax Act, 1961.2. Issuance of notice and order in the name of a non-existent entity.3. Reassessment proceedings without proper approval under Section 151 of the Act.4. Validity of reasons recorded for reopening assessment.5. Consequences of procedural errors and jurisdictional defects.Summary:1. Invalid Exercise of Jurisdiction under Section 263:The appellant contested the validity of the order passed under Section 263 by the Principal Commissioner of Income Tax (Pr. CIT), arguing that the jurisdiction was improperly exercised. The ITAT Kolkata noted that the original revisionary order dated 13.03.2020 was void ab initio as it was issued in the name of a non-existent entity, Madhuban Dealers Pvt. Ltd., which had been converted into Madhuban Dealers LLP. Consequently, the subsequent notice and order dated 23.03.2022 were also invalid.2. Issuance of Notice and Order in the Name of a Non-Existent Entity:The ITAT emphasized that issuing notices and orders in the name of a non-existent entity renders them invalid. The appellant had informed the Assessing Officer (AO) about the conversion of the company into an LLP. Despite this, the Pr. CIT issued the notice under Section 263 and passed the order in the name of the dissolved entity, which was deemed non-est in the eyes of law.3. Reassessment Proceedings Without Proper Approval under Section 151:The appellant argued that the reassessment notice under Section 148 was issued without obtaining prior approval from the Joint/Addl. CIT, as required under Section 151 of the Act. The ITAT found that the approval proforma was not signed by the competent authority, rendering the reassessment proceedings null and void. Consequently, the order passed under Section 147 was invalid, and any subsequent actions, including the revisionary order under Section 263, were also invalid.4. Validity of Reasons Recorded for Reopening Assessment:The ITAT observed that the reasons recorded for reopening the assessment were done mechanically and without proper application of mind. The information pertained to a different assessment year, making the recorded reasons invalid. Thus, the reassessment order dated 27.12.2017 was void ab initio, and the revisionary action under Section 263 was non-est in the eyes of law.5. Consequences of Procedural Errors and Jurisdictional Defects:The ITAT highlighted that any order passed without jurisdiction is a nullity. It cited the Hon'ble Supreme Court's decision in the case of Maruti Suzuki India Ltd., which held that orders passed in the name of non-existent entities are void. The tribunal also referred to the decision of the Hon'ble Gujarat High Court in P.V. Doshi vs. CIT, emphasizing that jurisdictional defects cannot be cured by consent and render the orders void.Conclusion:The ITAT Kolkata quashed the revisionary jurisdiction and the order passed under Section 263, declaring them invalid and void. The appeal of the assessee was allowed, and the order was pronounced in the open court on 7th November 2023.